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Paragon, the specialist buy-to-let lender, has reported a 34.8% rise in profits in its half-year results for the six months ending March 31, 2011.

The £39.5m pre-tax profits compare with £29.3m made in the comparable period in the previous financial year.

Paragon, which returned to new buy-to-let lending last autumn, also reported just 0.7% buy-to-let arrears, well below industry averages. It has lent £50.2m worth of new buy-to-let mortgages since reopening its books.

John Heron, director of mortgages, said: “The performance of the buy-to-let portfolio continues to be exemplary, with strong customer retention and low arrears levels combining to deliver excellent revenues and profits for the period.

“Arrears across Paragon’s £8.2bn of buy-to-let loan assets continues to fall, and at 0.75%, including Receiver of Rent cases, is outperforming both market peers and the wider mortgage sector.”

On Paragon’s return to new lending via the Paragon Mortgages and Mortgage Trust brands, Heron said: “Our initial focus on returning to the market was re-establishing our distribution base and we have widened our product range to cater for a broader spectrum of landlord customers.

“We have three main intermediary channels and have built strong relationships with all of these, including specialist commercial finance brokers, directly authorised mortgage adviser firms and key networks. All major network members can now access Paragon’s products through one of our channels.

“In addition, we have developed two complementary product strategies through two brands.

“Paragon Mortgages typically caters for professional landlords with complex buy-to-let propositions, such as Houses in Multiple Occupation, multi-unit blocks and limited companies, and can accommodate higher aggregate balances of up to £5m.

“Mortgage Trust is focused on mainstream landlords – those landlords who wish to purchase single, self-contained properties and are typically investing to augment savings and other investments.

“Given the start-up nature of the relaunch and the normal conversion cycles for buy-to-let mortgage loans, the portfolio of completed accounts builds over time. However, our new lending activities are gathering momentum and pipelines loans are converting to completed loans at an increasing rate. Given the complex nature of many of the buy-to-let propositions Paragon handles, individual transactions can take some time to complete.

“Nevertheless, completions to date are £50.2m and we have £94.7m of offers and applications in the pipeline, which is in line with our expectations.”

Heron added: “In addition to developing our new lending proposition, we have been building the loan portfolio acquisition and third party servicing arms of our business. We feel this is a growth area, and with an estimated £250bn in unwanted loan assets up for sale by UK banks, there are opportunities in the marketplace.”